DraftKings sues former VIP exec over claims he stole trade secrets for Fanatics
Michael Hermalyn allegedly stole details on high-value customers and lied about mourning the loss of a friend when he secretly travelled to Fanatics’ LA office last week to negotiate employment
A former DraftKings executive who managed the VIP player account team is being sued by the US operator for allegedly stealing confidential information and soliciting customers and employees before leaving and joining Fanatics.
In a 49-page filing, lodged with the US District Court for the District of Massachusetts, it is claimed defendant Michael Hermalyn “clandestinely met” with the leadership team at Fanatics – the parent company of Fanatics Betting and Gaming – around a year ago to discuss employment.
The filing states that, in the summer of 2023, Hermalyn encouraged his subordinates to meet with Fanatics about potential jobs, “while at the same time urging DraftKings to pay himself and his subordinates large retention payments, valued in the millions of dollars.”
Then, late last week, DraftKings says the defendant falsely claimed to be absent from work due to mourning the death of a friend from Pennsylvania when in fact he secretly went to Fanatics’ office in Los Angeles and negotiated an employment contract.
Geolocation data, call logs and other activity on Hermalyn’s DraftKings account all showed that he was in California instead of his “purported leave.”
What’s more, it’s alleged that he downloaded DraftKings’ confidential business plan for the Super Bowl while at Fanatics’ office, as well as information only a “handful” of other employees could access including a list of business partners and the company’s marketing strategy.
The business plan apparently included details about the representatives of teams and leagues, as well as athletes, celebrities, influencers and corporate officers and directors attending the Super Bowl this Sunday, 11 February, in Las Vegas.
“In the hands of a competitor like Fanatics, the information Hermalyn accessed and downloaded represents a significant threat to DraftKings’ business – especially during the crucial days leading up to and during the Super Bowl,” the court papers explain.
The documents continue: “Customer loyalty is one of the most important competitive edges in the gaming industry. Hermalyn knows DraftKings’ playbook on how to engage and retain VIP clients.
“On information and belief, Hermalyn, acting in concert with Fanatics, timed his departure and theft of confidential information to coincide with the critical days leading up to the Super Bowl to further a scheme to irreparably interfere with DraftKings’ customer and business relationships by pursuing those relationships at Fanatics using the confidential information and goodwill that he obtained at DraftKings.”
The filing goes on to state Hermalyn also fraudulently tried to establish residency in California during his 48-hour trip to Los Angeles “so he could resign from DraftKings and try to invalidate his non-compete agreements in California state court only a few days later.”
The plaintiff argues that the defendant “maintains a multi-million-dollar residence in New Jersey, where his wife still works and his kids go to school.”
“He is no more Californian than [New Jersey] Governor [Phil] Murphy,” the filing remarks.
On 1 February, the defendant “abruptly resigned” from his role overseeing VIP customer acquisition and retention at Boston-based DraftKings to “take a nearly identical role with Fanatics,” the filing states.
His LinkedIn profile still shows Hermalyn as being employed as “SVP, Growth” at DraftKings for the past two years and two months. He first joined the sports betting, DFS and igaming operator in September 2020 as SVP of business development.
DraftKings claims it conducted a “limited investigation” in the days after Hermalyn’s resignation and discovered that during his time with the company he “engaged in numerous acts of deception, lies and other misconduct.”
“DraftKings has already uncovered evidence showing that Hermalyn actively solicited DraftKings employees to join Fanatics this past year and spent thousands of dollars of DraftKings’ money to enter into an agreement with a restaurant group with which Hermalyn had, on information and belief, an undisclosed personal affiliation,” the plaintiff adds.
In a statement, a Fanatics spokesperson said: “This is just sour grapes. DraftKings is understandably upset that one of its employees left for the greener pastures at Fanatics.
“The fact that they are trying to drum up ridiculous allegations on one of their well-respected executives in an attempt to ruin his reputation sheds some light on why employees may be choosing to leave that organization.”
Sports merchandize giant Fanatics branched out into sports betting last year with the launch of Fanatics Sportsbook headed up by former FanDuel CEO Matt King, who recently spoke to EGR about the company’s strategy.
The Lower Manhattan-based Fanatics Betting and Gaming (FBG) employs around 600 people.
EGR has reached out to Hermalyn for comment.